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Total revenues of $25.4 million versus $24.2 million for the same time last year and $27.4 million from the prior quarter

Adjusted EPS of $0.03 versus $0.03 for the same time last year and $0.06 from the prior quarter

Adjusted EBITDA of $1.5 million compared to $1.5 million for the same time last year and $2.3 million from the prior quarter

New orders totaling $20.1 million

Backlog of orders as of March 31, 2016 totaled approximately $57.7 million versus $63.4 million for the same time last year and $63.0 million from the prior quarter

On May 9, 2016, the Board of Directors elected Lead Independent Director Jon B. Kutler as the new Chairman of the Board of Directors

Subsequent to quarter end, awarded a contract from the U.S. Department of State for MILO Range Training Systems valued at up to $40 million

Subsequent to quarter end, awarded a contract from the U.S. Marine Corps valued at $2.6 million for the design, development and delivery of four MEHPS systems

"Our first quarter financial and operating results highlight the progress we are making and the benefits of the cost restructuring and production enhancements we implemented in 2015," commented Steven Esses, Arotech's President and CEO. "The defense industry continues to advance initiatives designed to increase energy efficiency and enable military organizations to perform missions, while acknowledging energy as a potential vulnerability. We believe we are well positioned to capitalize on this trend and are winning and effectively executing on development contracts in our Power Systems Division, placing us in a strong competitive position to win larger, higher margin, contracts and follow-on production orders from key customers."

"On the Simulation and Training side of our business we continue to execute according to plan, generating strong margins that are typical with this business," Esses added. "Subsequent to the end of the quarter we received an Indefinite Delivery Indefinite Quantity (IDIQ) award with a potential value of up to $40M for our MILO Range Training Systems' simulator products. This highly competitive procurement further validates our position as a global leader in the international law enforcement judgmental skills simulator market, and provides a streamlined acquisition process to deliver this important training capability to the various organizations supported by the U.S. Department of State."

Esses concluded, "Market demand on all sides of our business remains robust, and we are executing both from an operational perspective and competitively in the marketplace, which we believe will lead to growth and increased profitability over the long-term."

First Quarter Financial Summary

Revenues for the first quarter were $25.4 million, compared to $24.2 million for the comparable period in 2015. The year-over-year increase was driven by revenue growth in our Power Systems Division.

Gross profit for the first quarter was $7.7 million, or 30.3% of revenues, compared to $6.9 million, or 28.5% of revenues, for the prior year period.

Operating income for the first quarter of 2016 was a loss of ($119,000) compared to operating income of $68,000 for the corresponding period in 2015. Operating expenses were $25.5 million in the first quarter of 2016 compared to $24.2 million in the year ago quarter.

Total other income was a loss of ($312,000) for the first quarter of 2016 and for the corresponding period in 2015.

The Company's net income for the first quarter was a loss of ($644,000), or ($0.03) per basic and diluted share, compared to a loss of ($483,000), or ($0.02) per basic and diluted share, for the corresponding period last year.

Adjusted Earnings per Share (Adjusted EPS) was $0.03 for the first quarter of 2016 and for the corresponding period in 2015.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) was approximately $1.5 million for the first quarter of 2016 and for the corresponding period of 2015.

Arotech believes that information concerning Adjusted EBITDA and Adjusted EPS enhances overall understanding of its current financial performance. Arotech computes Adjusted EBITDA and Adjusted EPS, which are non-GAAP financial measures, as reflected in the tables below.

Balance Sheet Metrics

As of March 31, 2016, the Company had $11.5 million in cash and cash equivalents, as compared to December 31, 2015, when the Company had $10.7 million in cash and cash equivalents.

As of December 31, 2015, Arotech has net operating loss carryforwards for U.S. federal income tax purposes of $40.7 million, which are available to offset future taxable income, if any, expiring in 2021 through 2032. Utilization of U.S. net operating losses is subject to annual limitations due to provisions of the Internal Revenue Code of 1986 and similar state provisions. The Company accrued $151,000 in non-cash tax expenses in the first quarter of 2016, reflecting the uncertainty of the deductibility of intangible expenses for federal income tax purposes.

As of March 31, 2016, the Company had total debt of $15.3 million, consisting of $5.0 million in short-term bank debt under its credit facility and $10.3 million in long-term loans. This is in comparison to December 31, 2015, when the Company had total debt of $20.3 million, consisting of $4.1 million in short-term bank debt and $16.2 million in long-term loans.

The Company also had $10.1 million in available, unused bank lines of credit with its primary bank as of March 31, 2016, under a $15.0 million credit facility through our main bank.

The Company had a current ratio (current assets/current liabilities) of 2.1, compared with the December 31, 2015 current ratio of 1.9.

2016 Guidance

The company is affirming its 2016 outlook for total revenue of $100 to $112 million, with adjusted earnings per share (Adjusted EPS) of $0.18 to $0.23, and adjusted EBITDA of $7 million to $9 million. This outlook includes only organic contribution, and does not take any potential acquisition activity into account. Adjusted EPS is based on 26.5 million current shares outstanding. The financial guidance provided is as of today and Arotech undertakes no obligation to update its estimates in the future.

Conference Call

The Company will host a conference call tomorrow, Tuesday, May 10, 2016 at 9:00am Eastern Time, to review the Company's financial results and business outlook.

To participate, please call one of the following telephone numbers. Please dial in at least 10 minutes before the start of the call:

US: 1-888-471-3843

International: + 1-719-325-2454

Conference ID: 9168464

The conference call will also be broadcasted live as a listen-only webcast on the investor relations section of Arotech's website at http://www.arotech.com/.

The online webcast will be archived on the Arotech's website for at least 90 days and a telephonic playback of the conference call will also be available by calling 1-877-870-5176 within the U.S. and 1-858-384-5517 internationally. The telephonic playback will be available beginning at 12:00pm Eastern time on Tuesday, May 10, 2016, and continue through 11:59 pm Eastern time on Tuesday, May 17, 2016. The replay passcode is 9168464.

About Arotech Corporation

Arotech Corporation is a leading provider of quality defense and security products for the military, law enforcement and homeland security markets, including multimedia interactive simulators/trainers and advanced battery solutions, innovative energy management and power distribution technologies, and zinc-air and lithium batteries and chargers. Arotech operates two major business divisions: Training and Simulation, and Power Systems.

Arotech is incorporated in Delaware, with corporate offices in Ann Arbor, Michigan, and research, development and production subsidiaries in Michigan, South Carolina, and Israel. For more information on Arotech, please visit Arotech's website at www.arotech.com.

Except for the historical information herein, the matters discussed in this news release include forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect management's current knowledge, assumptions, judgment and expectations regarding future performance or events. Although management believes that the expectations reflected in such statements are reasonable, readers are cautioned not to place undue reliance on these forward-looking statements, as they are subject to various risks and uncertainties that may cause actual results to vary materially. These risks and uncertainties include, but are not limited to, risks relating to: product and technology development; the uncertainty of the market for Arotech's products; changing economic conditions; delay, cancellation or non-renewal, in whole or in part, of contracts or of purchase orders (including as a result of budgetary cuts resulting from automatic sequestration under the Budget Control Act of 2011); and other risk factors detailed in Arotech's most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and other filings with the Securities and Exchange Commission. Arotech assumes no obligation to update the information in this release. Reference to the Company's website above does not constitute incorporation of any of the information thereon into this press release.

CONDENSED CONSOLIDATED BALANCE SHEET SUMMARY (UNAUDITED)

(U.S. Dollars)

March 31, 2016

December 31, 2015

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

11,480,691

$

10,698,405

Trade receivables

14,957,216

17,401,479

Unbilled receivables

9,789,431

12,132,484

Other accounts receivable and prepaid

1,291,747

1,007,358

Inventories

9,907,976

9,607,836

TOTAL CURRENT ASSETS

47,427,061

50,847,562

LONG TERM ASSETS:

Property and equipment, net

6,483,985

6,440,270

Other long term assets

5,779,622

5,407,427

Intangible assets, net

8,594,678

9,334,730

Goodwill

45,614,293

45,463,027

TOTAL LONG TERM ASSETS

66,472,578

66,645,454

TOTAL ASSETS

$

113,899,639

$

117,493,016

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Trade payables

$

5,230,720

$

5,914,042

Other accounts payable and accrued expenses

5,320,801

5,560,040

Current portion of long term debt

1,067,523

4,362,438

Short term bank credit

4,953,579

4,060,000

Deferred revenues

5,596,351

6,879,815

TOTAL CURRENT LIABILITIES

22,168,974

26,776,335

LONG TERM LIABILITIES:

Accrued Israeli statutory/contractual severance pay

8,007,570

7,516,980

Long term portion of debt

9,252,338

11,856,522

Other long-term liabilities

7,262,259

7,295,808

TOTAL LONG-TERM LIABILITIES

24,522,167

26,669,310

TOTAL LIABILITIES

46,691,141

53,445,644

STOCKHOLDERS' EQUITY:

TOTAL STOCKHOLDERS' EQUITY (NET)

67,208,498

64,047,371

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

113,899,639

$

117,493,016

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(U.S. $ in thousands, except per share data)

Three months ended March 31,

2016

2015

Revenues

$ 25,406,481

$ 24,226,708

Cost of revenues

17,712,174

17,329,479

Research and development expenses

1,097,728

1,094,264

Selling and marketing expenses

1,654,866

1,225,416

General and administrative expenses

4,292,413

3,648,442

Amortization of intangible assets

768,003

860,773

Total operating costs and expenses

25,525,184

24,158,374

Operating income (loss)

(118,703)

68,334

Other income

26,037

15,978

Financial income (expense), net

(337,658)

(327,608)

Total other income (expense)

(311,621)

(311,630)

Income (loss) before income tax expense

(430,324)

(243,296)

Income tax expense

213,453

239,381

Net income (loss)

(643,777)

(482,677)

Other comprehensive income, net of income tax

Foreign currency translation adjustment

360,098

(245,514)

Comprehensive income (loss)

$ (283,679)

$ (728,191)

Basic net income (loss) per share

$ (0.03)

$ (0.02)

Diluted net income (loss) per share

$ (0.03)

$ (0.02)

Weighted average number of shares used in computing basic net income/loss per share

24,797,875

23,305,679

Weighted average number of shares used in computing diluted net income/loss per share